Pricing paradox: Hungarian food costs less abroad – here is why
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A curious trend has emerged in the food industry: in many cases, Hungarian-produced food can be bought for a lower price in other European countries, like Germany. While travelling abroad, many Hungarians have likely encountered the eye-catching revelation that Hungarian products such as salami, pasta or snacks are notably more affordable compared to their prices back home.
An article by Portfolio.hu delves into the trajectory of a hypothetical meat product manufactured in Hungary priced at HUF 5,000 (EUR 12,6) in a quest to unravel the reasons for the price difference. The product which is presumed to be of superior quality and exportable enjoys demand both domestically and internationally. What does this hypothetical product tell us about the price difference?
Efficiency and wages
It is widely acknowledged in professional circles that the Hungarian food industry’s efficiency trails behind that of larger European producers which results in elevated operational costs within the country. Furthermore, the domestic food industry, which is in need of modernisation, contends with a higher interest rate when seeking investment opportunities for growth and development.
While this favours foreign corporations, it only partially explains why domestically produced goods can be cheaper abroad than at home. However, it is also evident that the less efficient Hungarian food industry struggles to mitigate economic impacts without resorting to price increases.
Competition strength also plays a role because a smaller domestic market with fewer players tends to inflate prices domestically, unlike the larger more efficient European market. Moreover, it is likely that higher domestic inflation provides room for raising prices, especially as competitors adjust accordingly and in an inflationary context, workers tend to demand higher wages. However, wage levels alone do not provide sufficient explanation for this trend.
Another reason is the income in Hungary lower than other countries but highest inflation. Compared with other country’s income, they feel the price is cheaper than Hungary.
It’s not just about feeling the price is cheaper relative to incomes, it IS cheaper when converted. Pick Wintersalami for example – that totemic emblem of Hungarian food – is cheaper in my local grocery store in the UK than the price for the same product in Hungary and that’s even at a time when the Forint is approaching historical lows which should make the Hungarian price appear to be a bargain in comparison. It’s laughable but I’ll be bringing Wintersalami from home to consume in Hungary during my upcoming stay simply because the price is lower in the UK. I may be wrong but I also wouldn’t be surprised if the quality of the exported product was also higher with a view to increasing its popularity among foreign consumers.